The fund gained 0.4% over the last quarter ended 30 June 2015, outperforming its relative benchmark by 0.3%. Questions raised yet again over the ability of Greece to function sustainably within the Euro arrangements shed a layer of uncertainty over the market. The 3 month parabolic gain of more than 50% in the Chinese A-share stock market came crashing down towards the latter part of the quarter. Cash proved to be the best asset class performer during the quarter with a return of 1.6% which contributed to the fund's overall performance in this risk-off environment. These volatile and uncertain market conditions pulled equity performance lower marginally by -0.1%. Bonds struggled in a rising rate environment and both domestic and foreign bond returns declined during the quarter by -2.7% in rand terms. The fund benefitted from not being exposed to any listed property as the asset class declined 6% over the quarter.

The sell-off towards the end of the quarter increased the relative sector performance gap further, with the resources index continuing its relative underperformance. Not owning gold companies contributed positively in this environment. Overweight positions to defensive industrial counters like British American Tobacco and Vodacom impacted the fund performance favourably as well as US biopharmaceutical company Gilead Sciences, Chinese insurer Ping An and manufacturer Shimadzu Corporation.

The recovery in the oil price saw underweight positions in Sasol and MTN detracting from performance. High quality industrial companies like Aspen and Mediclinic, underperformed during the quarter but remain star performers over the longer term. Similarly, positions in good quality companies within the financial sector, like Sanlam and Alexander Forbes underperformed. Added to these, not being exposed to mid-cap private equity player, Brait, contributed negatively. The US 10yr bond yield sold off 50bps to 2.35%, mostly pushed higher by rising German bund yields. The latter moved higher as improved European economic data presented itself, fuelled by improved retail sales numbers and a much weaker currency which boosted exports. The heightened equity valuation levels in the market motivated a further reduction in equity to 25% in favour of cash. Our preference remains skewed to offshore equities, where we find far more value and conviction relative to an expensive domestic equity market.

Looking Ahead

The fund is well diversified in terms of both asset classes and multi-national exposure, with a bias towards income generating investments to target a relatively stable return over long periods of time. Investors need to continue to temper their expectations given the exceptional returns, significantly above inflation, which have been enjoyed over the past six years with relatively low volatility and risk apparent in generating these high returns.